Finance Bill (First sitting)

Kelvin Hopkins Excerpts

Committee Debate: 1st Sitting: House of Commons
Tuesday 17th October 2017 Public Bill Committees

[Peter Dowd]

It is a pleasure to serve under your chairmanship, Mr Howarth. The extent, nature and quality of advice received by a person wanting a pension is of great importance and significance. That is particularly the case considering that, in 2017, 30% of the working age population is at state pension age or older. The Department for Work and Pensions recently summarised perfectly the importance of pensions advice on its website:

“For most people in the UK, their pension savings will be their largest financial asset, which they will save towards over the course of their working lives”.

That gets to the nub of the matter. Hopefully, most of us will be saving towards a pension for the majority of our lives and we are ultimately relying on that to secure a good-quality standard of living when we retire. Therefore, the advice received matters a great deal.

For many, the securing of pension advice is, given the nature of their employment, for example, not as problematic. People who work in certain sectors, such as the finance sector, on the whole will find that their companies automatically cover pension advice. For others, the cost of such advice is minimal in the grand scheme of things. However, it has to be said that, for those who do not have much disposable cash and whose retirement is dependent on making wise investments with their pensions and ensuring that they save the right amount, good-quality advice is the key to a more secure retirement. I am sure that that will be greeted with unanimous nodding from Government members, if nothing else.

As Committee members know, the financial advice market review was launched in August 2015

“to explore ways in which government, industry and regulators could take individual and collective steps to stimulate the development of a market that delivers affordable and accessible financial advice and guidance to everyone.”

That is a laudable endeavour if ever there was one. It set out a strong and compelling case that there is a retirement “advice gap” for those without significant wealth. Research by Unbiased, an organisation of Financial Conduct Authority-regulated advisers who are independent of product providers, found that those who sought retirement advice increased their retirement savings by an average of £98 a month. However, less than one third of people have accessed financial advice on their pension. The financial advice market review found that many people perceived financial advice to be unaffordable or “not for people” like them.

The advice gap is not getting any smaller. Although the introduction of the exemption for the first £500-worth of pensions advice to employees is welcome, particularly as it replaces the provisions that limited the advice that people could receive—the cap was set at £150—we think that that does not go far enough. Most people in the pension advice sector would reasonably point out that £500-worth of tax-free advice is a relatively small figure given the importance of the decisions that people face. There are genuine questions to be asked about the impact that such a figure will have on the current pensions advice gap and, importantly, on the quality of that advice.

[Kelvin Hopkins (Luton North) (Lab)]

My hon. Friend is absolutely right about the affordability of pensions advice, but the trustworthiness of pensions advice is also an issue. Even I—I am fairly numerate—do not trust the advice I am given, although fortunately the Independent Parliamentary Standards Authority gives better advice than most. Many ordinary people not only think that it is not for the likes of them and are rather nervous, but fear that they are not given correct and disinterested advice.

--- Later in debate ---

[Peter Dowd]

We all agree that the current model of legal expenses or indemnity insurance for employees is wholly inadequate to the modern workplace. It is worth getting a plug in here in relation to the household insurance that people have for when they wish to defend their position in court, whether criminal or civil. I have experience of some of these policies not being fit for purpose. That goes to the heart of some of these issues, although it is not directly related. I am sure that other Members have had people come to them with insurance policies that they bought thinking they would cover them for this, that or the other, only to find that they are not fit for purpose. It is worth this Committee sending the message out that some of those policies are not up to scratch.

Getting back to the point, under the current system, only an employee who has had an allegation made against them can claim for legal expenses, which will be deducted from their earnings. Potentially, if a person is called as a witness at a public hearing, he or she will immediately be put out of pocket for any legal expenses. Similarly, if an employee is to give evidence at a public hearing, perhaps in one of our Committee Rooms in this building, under the current system they will be out of pocket if they need legal counsel. That is a deterrent to both employee and employer. The measure would tidy up and expand the current, rather vague, provision to cover employees giving evidence at public hearings, which we welcome; however, I have a number of questions.

How many employers will the new measure cover? Will it cover all employers? How extensive is it? Are any particular sectors affected by the measure? What is the estimated cost of such a measure to the Exchequer? Does the measure include cover for employment tribunals? That has been a bone of contention in the past few months, in the light of the Government’s introduction of quite significant fees for people making employment tribunal claims.

[Kelvin Hopkins]

There is evidence that thousands of people have been deterred from bringing a case to employment tribunals simply because of the fees.

[Peter Dowd]

My hon. Friend makes an important point. That is why it is important to tease out the issues. People get confused and deeply worried about these matters, so we need clarity.

Our concern is that the measure will, in essence, be used as a tax break for employers, to the detriment of employees. I am not saying that that is the intention, but it is important to get clarity. Given the lack of detail, we believe that a review of the impact of the changes on the coverage of legal expenses is in order. It would focus specifically on the effectiveness of the measure, the value of the relief and, of course, how many employers and employees it brings within its purview. I reaffirm the point: it is important that this area is clarified and that people know the direction of travel, which is why we moved the amendment, to keep tabs on the proposal.